Tech Guest Viewpoint: Why Grocers are Getting ‘Fresh’ with Suppliers
By David Barach, Market6
In their quest to lead healthier lifestyles, consumers’ demand for healthy, fresh foods is at an all-time high, as is their fresh food spending at traditional supermarkets. During these store visits, however, shoppers expect fresh assortments to be aesthetically appealing, ripe and locally grown. To ensure this “freshness factor,” grocers are using analytics to collaborate with supplier partners in effort to reduce lead times, lower inventory levels, and diminish shrink--all factors that slash operating costs, improve customer satisfaction and drive sales.
Even with so many retail options available for consumers to purchase fresh foods, traditional grocers still remain their top choice. According to the “2014 National Grocers Association SupermarketGuru Consumer Survey Report,” 74% of consumers are drawn to supermarkets based on their perimeter departments and fresh food displays. And 86% of these shoppers are spending more than half of their fresh-food budgets at supermarkets, an increase among households that only allocated between 25% and 50% of these funds to grocery stores in 2013, the study said.
This creates an opportunity for food retailers not only to be the shopper’s top retailing choice, but also to be an advocate in their journey toward healthier lifestyles. Like all alliances, these partnerships are built on trust--a factor that transcends across merchandise quality, value and price. Those retailers that can forge this trust will win customer loyalty and become their consumers’ primary shopping choice.
Creating this advocacy among shoppers requires a variety of strategies, including:
• Creating store sections or categories dedicated to health and wellness. While perimeter departments are often considered natural or healthy, grocers need to focus the same attention on center store, frozen sections, as well as “green” health and beauty and general merchandise. Store-within-a-store concepts, as well as additional wellness product introductions, can boost efforts.
• Introducing healthy private label merchandise. Historically, health and wellness merchandise has been associated with higher price tags. To appeal to a broader shopping base however, private label offerings are a must.
• Launching fresh-focused store formats or banners. As the industry consolidates, these new concepts are a great competitive differentiator. King Kullen’s “Wild By Nature” and Tesco’s “Fresh & Easy” banners are great examples of this commitment.
Creating a “fresh” persona is great first step, but to gain credibility among consumers, retailers need to tap the power of supply chain partners. For example, grocers have direct relationships with distributor partners, as well as local farmers, that supply stores with fresh merchandise. As supermarkets and distributors begin to collaborate and share mission-critical demand information in a secure, shared environment, these partners will find ways to improve the value of fresh merchandise across a variety of areas--and in turn, strengthen the trust and loyalty of shoppers.
While this sounds like a daunting task, it is actually easier than it sounds. The following steps can set the journey in motion:
• Create a foundation infrastructure to support collaboration. This requires a shared, secure Web-based platform where suppliers and retailers can share a single version of shopper-specific, demand and location information, and apply analytics to data to enhance category plans and track results among specific vendors, categories and merchandise across specific locations.
• Understand the value of freshness and its impact on shopper loyalty. As supply chain partners compare customer demand and segment data on existing and new product introductions, companies can determine customer loyalty and product integrity. They can drill down further by applying key performance indicators (KPIs), such as product trial sales and repeat purchases.
• Build merchandise integrity through vendor scorecards. In addition to product quality among fresh categories, consumers expect diversity and availability. Realizing supply chain disruptions, poor quality merchandise and other risk factors can jeopardize sales, retailers are applying vendor scorecards in effort to reduce risk and protect profits. Leveraging these electronic applications allow grocers to monitor and measure KPIs, such as inventory levels, on-time deliveries, pricing metrics, shrink, overall improvements, and how these criteria impact business goals.
• Keep food safety paramount. Food safety protocols continue to get tighter and food recalls are on the rise. By relying on collaborative portals to shorten supply chain processes and more efficiently ship fresher product to store shelves, retailers can rebuild confidence and guarantee safe merchandise.
By adopting the described collaboration roadmap, suppliers and retailers can more closely harmonize supply chain and inventory data, and create a shared demand-driven forecast. Besides becoming a mission-critical pre-requisite to featuring fresh, healthy products at store-level, this formula is the foundation grocers need to satisfy customer demand, drive sales, and most importantly, become consumers’ top “wellness advocate.”
David Barach is Director of Solutions at Market6.